Question

At the beginning of 2016, Robotics Inc. acquired a manufacturing facility for $13.3 million. $10.3 million of the purchase price was allocated to the building. Depreciation for 2016 and 2017 was calculated using the straight-line method, a 25-year useful life, and a $2.3 million residual value. In 2018, the estimates of useful life and residual value were changed to 20 total years and $630,000, respectively.

What is depreciation on the building for 2018? (Round answer to the nearest whole dollar.)

***I keep getting $451,500 and the system tells me I am wrong. Please help!!***

Answer 1

Depreciation Expense on the building for 2018

Straight Line Depreciation

Straight Line Depreciation = [Cost – Salvage Value] / Useful Life

= [$103,00,000 – 23,00,000] / 25 Years

= $80,00,000 / 25 Years

= $320,000 per year

Accumulated Depreciation for the year ended 2018 = $640,000 [$320,000 x 2 years]

Book Value at the point of revision = Cost – Accumulated Depreciation

= $103,00,000 – 640,000

= $96,60,000

Book Value at the point of revision = $96,60,000

Revised Salvage Value = $630,000

Years of life remaining = 18 Years [20 years – 2 years already provided]

Therefore, The Depreciation Expense on the building for 2018 = [Remaining Depreciable cost – Revised salvage value] / Remining useful life

= [$96,60,000 – 630,000] / 18 Years

= $90,30,000 / 18 years

= $5,01,667

“Hence, The Depreciation Expense on the building for 2018 = $5,01,667”